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Alarm at Shell retention awards – reports

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AFX UK Focus: Alarm at Shell retention awards – reports

LONDON (Thomson Financial) – Royal Dutch Shell Plc. and several other leading companies stand to feel the wrath of shareholders in coming weeks because of a growing trend of paying executives handsome bonuses simply for staying in their jobs, according to a report in the Financial Times.

Shell plans to make one-off retention payments to three executive directors worth about 1 million euros each the FT reported. A similar move by BP prompted a shareholder backlash at its annual meeting last week.

The awards vest in 2011 provided the trio, who are all in the running to succeed Jeroen van der Veer when he retires as chief executive in June 2009, are still at the company. The awards have no performance conditions other than their value being dependent on the share price. The payouts will be put to a shareholder vote at the annual meeting on May 20 the FT said.

Risk Metrics, which advises 1,500 companies worldwide, including large institutional investors on how to vote at shareholder meetings, is warning clients that at least 10 large companies have made retention payments or are seeking permission to do so.

David Paterson, head of UK research at Risk Metrics, said retention awards known disparagingly in the U.S. as “pay for respiration” were “not consistent with the normal structure that aligns the individual executive’s interests with that of the shareholders”. Of particular concern, he said, were those awards that had little or no link to performance the Financial Times said.

The paper also reported that The Association of British Insurers has expressed concern about an emerging trend in retention payments for executives passed over for the top job. In a letter to remuneration consultants, it said: “Additional awards to unsuccessful candidates, particularly if there are no performance conditions attached, should be the exception rather than the norm.”

By Anita Likus; [email protected] aml/ejp

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